The NZ economy is the standout economy this year with a predicted real growth rate of 3.5% y/y, which is considerably higher than any other member of the G10. The only other G10 economies to come even remotely close are the UK, Australia and Canada, with predicted growth rates of 3.0%, 2.8% and 2.4% respectively.
NZ’s Q3 growth data was released today, and sure enough the numbers would be envy of other advanced economies. NZ’s economy grew a seasonally adjusted 1.0% last quarter, beating an expected 0.7% growth rate. Year-on-year growth was slightly below expectations at 3.2% (expected 3.3% y/y), but this was largely due to a downwards revision in prior numbers.
Primary industries drove the strong expansion in Q3, especially agriculture and mining according to NZ’s official statistics agency. Manufacturing was also a key contributor; it was up an impressive 2.0%. The biggest drags on the economy came from business services and transport, which were down 2.0% and 2.6% respectively.
The data momentarily bolstered the NZ dollar but it proved to be an insufficient force against a strong push towards the US dollar on the back of this morning’s FOMC meeting and Yellen’s press conference. The Fed dropped the over used line stating that the bank will keep rates low for a considerable period of time. For a full rundown of the meeting see my colleague Matt Weller’s report here.
What’s next for NZDUSD?
NZDUSD was battered by this morning’s events in the US, as every major currency was against the dollar for that matter. The pair remains in a long-term downward trend despite some encouraging economic data out of NZ this week. Apart from today’s GDP numbers, the GDT Price Index jumped 2.4% in the first couple of weeks of December – its best performance this year which is a big deal for a commodity based economy like NZ.
While we like the kiwi against some currencies, the US dollar isn’t one of them. Besides the fundamental strengths of the US dollar, there is some technical weakness in the NZDUSD. Momentum appears to be shifting to the downside once again, thus we may see the pair test the bottom of its downward trading channel.
Source: FOREX.com
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